Monday, March 08, 2010

ReInventing Money

Money is an abstraction used by people to exchange goods or services from other people in exchange of goods or services they provide to other people. It replaced a systems called barter system where goods or services could only be exchanged for goods or services, to a system where they could be exchanged for money.

Money is pretty good thing. I want to see a doctor and I am a software professional. Chances are the doctor don't need me to fix his software, so how do I take his services. Money. We talk about alienation of people, of money minded nature of people, of hatred in the society, of people being less human, insensitive to other people...and the cause is money. Money disconnects people with people. That is its objective. But on the contrary money is the most human thing, which connects arbitrary, unknown people and makes them solve your problems. With industrialization and modern corporate culture is it companies that now solve most of our problems and not individuals. Well it is still some person finally but even persons are now virtualized by corporates. For example my relationship with Airtel is nothing more than a support call. My web search is just a page called google. Point is with every passing day we are trying really really hard to dismantle the structure of human interdependence with virtualization. We should stop complaining that people don't care about people any more because we are the ones creating/destroying it.

Here are some of the properties of money that are not shared by the model of human interdependence.

It devaluates. I have to pay more for the same thing in some time in future. It is really not needed but it does happens with money.

It is immortal. If I die I won't be able to write software for anyone. But if I have money, someone can still use it after I die. It gives its inheritors the same power as it gave to its creator whereas skills or services or goods (unless non perishable) will not work in the same way. Land for example will not give you money unless you cultivate it. Its mortality is still dependent on the dependent.

It gives you interest (via banks). My skills or goods when not in use give me nothing. They only help me get something when I give them to someone else.

Stock market is yet another kind of bank which gives you more interest with condition that you might loose your money.

If their is no inflation, we really don't need the banks to give us interest. Whatever we saved is probably all we need when we retire. Inversely do we have inflation because it helps banks? I don't know..may be. I don't have the statistics but I am sure banks made tons of money before every depression. What really is the instrument for making people help each other without both needing something from each other at the same time looks stupidly different, a beast of its own, when we look at things like banks, loans, interest, futures, derivatives, mutual funds, stock markets, etc.

Human interdependence is a zero sum game. With inflation, interest and stock markets money is not. Money was invented long long time ago. We have changed tons of things in last last few thousand years without touching money. I think if we think about this problem from scratch we can invent better models for people to help each other.